Gina has $39,000 total taxable income,which includes $6,000 of taxable income from Argentina.She paid $1,200 in foreign income taxes and her U.S.tax liability is $3,610.Gina's foreign tax credit is: (Do not round interim calculations)

Question

Quizplus · Accepted Answer

To calculate Gina's foreign tax credit, we need to determine the portion of her U.S. tax liability that is attributable to her foreign income.

First, we need to calculate the portion of her total income that is taxable in the U.S.:

$39,000 total income - $6,000 foreign income = $33,000 U.S. income

Next, we need to calculate the ratio of foreign income to total income:

$6,000 foreign income / $39,000 total income = 0.1538

This means that 15.38% of Gina's income is foreign income.

Now we can calculate the portion of her U.S. tax liability that is attributable to her foreign income:

0.1538 x $3,610 U.S. tax liability = $555

Finally, we can compare this amount to the foreign taxes that Gina actually paid:

$555 U.S. tax liability on foreign income - $1,200 foreign taxes paid = -$645

Since the foreign taxes paid ($1,200) are greater than the U.S. tax liability on foreign income ($555), Gina is eligible for a foreign tax credit of $555.

Gina Has $39,000 Total Taxable Income,which Includes $6,000 of Taxable